Rite-Solutions created a state-of-the-art “innovation engine” designed to provoke and align individual brilliance toward collective genius. The goal was to connect on an emotional level where all employees are entrusted with the future direction of the company, asked for their opinions, listened to, and rewarded for successful ideas. Our quest is for each employee to feel "more relevant" and turn that relevance into forward motion toward a future state that we all create.

The result: an organization in which ideas and people flourish—and new products, technologies, and directions are freely generated and deliver tangible rewards to all involved.

Context

Rite-Solutions is a software/system engineering company that builds advanced, mission-critical software for the Department of Defense, and first responders, as well as 7X24X365 back-office systems for casinos and internet gaming sites. Founded by 3 partners in January 2000, it is 100% employee-owned, with 175 technologists based in its Middletown, RI office and satellite offices in Ct and NH.

Triggers

How do you lead in the Web 2.0 world? It’s about making every employee feel relevant to the future of the company. I spent over 30 years in a highly-structured, command and control organization where good ideas really only flowed top-down, event hough we always asked for ideas from below. For my whole first career the ideas from below were incomplete and the ideas from above were biblical. The relationship we had with people was transactional—‘I pay you, you work. You behave, you stay.’ The knowledge economy allows a new and accelerated relevance (especially important for the newer Gens). In the old world, your relevance to the organization was defined more by your tenure and the level of your box in the pyramid of boxes than by your actual genius. Then, the knowledge revolution emerged. We believe there is a huge brain-drain that can stay engaged through knowledge-tethering if you make relevance a game of intellectual capital investments for retiring knowledge workers who have spent a career gaining knowledge that can help shape the future of an organization they continue to care about. Remaining relevant in retirement is only understood by retirees (I had the chance to become one in 1999).

When my long-time colleague Joe Marino and I sold our previous company in 1999 (also in the defense industry), we could have retired, but instead set out to build a company that would keep us relevant and capitalize on the collective intellectual bandwidth of the entire organization to “Innovate Every Day.” That company, Rite-Solutions, was built on two fundamental beliefs:

--Nobody is as smart as everybody (good ideas are not bounded by organizational structure, but can come from anyone, in any place, at any time)

--The hierarchical pyramid as a relevance structure is a relic of command and control conventional wisdom —more suited to controlling information flow than fostering innovation

The challenge, then, was to 1) develop a mechanism that could “operationalize” innovation by tapping the collective genius in the organization in a fun, non-intimidating way, and 2) to institute an approach to management with enough control to operate as a responsible, profitable business AND enough flexibility and freedom to unleash and leverage new ideas across the organization. Our safety net if we failed; we knew how to do command and control.

Key Innovations & Timeline

Scrapping the Pyramid—Building a Good Neighborhood

From the start, we scrapped the pyramid and the power politics that go along with it to rethink the company as a community. Or, even better, think of the best neighborhoods and what it means to be a good neighbor. In an organization that is full of boxes in a big old triangle, every time there’s an opening, there’s a food fight over that box. In a good neighborhood, people step forward when they’re needed and do what they can becuause they like where they live. There’s a lot less trauma in a good community than there is in an organization driven by vacancies.

How do you build a company into a good neighborhood? Start by putting everybody into the same boat. Every employee is an owner of the company (and the company is 100% employee-owned). Instead of a job title, every employee’s business card reads “One of FEW” ( which means “friends enjoying work”—and we mean that)! We all share offices (including the co-founders and all the top executives). All work here is team based and each person plays multiple roles and can work on multiple teams, many of them on a volunteer basis. Information is shared widely and often. We make it very clear that every person here is important to the future of this company, that we care about them—and that nobody can go it alone. We discuss that our success will be through One of FEW producing the Power of We.

You start to get the message Day One. At 9am on your first day of work we throw you a birthday party—with wrapped presents, cake and all kinds of fun. That morning, your family gets the “welcome wagon”—flowers, gifts and a personal note from me and Joe, delivered at home.

Why do we give people a party when they’re leaving a company? That’s not the time to make them feel important! How do we make people feel important the moment they join a company? The idea behind the birthday party is that you’ve arrived at a new place where you belong, you were expected, and you are important.

Even better, when you go to your birthday party, everyone in the room has a lot of different reasons to relate to you. New recruits fill out a “birth certificate,” which details their hobbies, travel experiences, family, schooling, pets, military service, and surprising facts—like a hobby of growing giant pumpkins or playing a particular instrument..

The birth certificate becomes a “trust token” both inside the organization (it pops up in your phone and email interactions with colleagues) and beyond. On every page of the Rite-Solutions website you’ll find an owl icon & the word “Who?” Click on it and up pops a window of birth certificates and contact information/e-mail form for every person connected to that piece of the business. By letting outsiders contact our people directly, we have shown that they are both important and trusted to interact on behalf of the company with potential clients. And it’s a lot more engaging for people interested in the company to email a real, living, breathing, human being than info@sales.com! Who you personally select to conmmunicate with will be a function of your hobbies, pets, hometown, instrument, etc.

Revving the Innovation Engine

In our old company when you had a good idea you had to go up in front of what we called the “murder board.” You’re standing up in the spotlight in front of six fat white guys who say they are there to help with your idea, but what they’re doing is shooting down your relevance.

In our quest to create a culture of innovation, we tried everything—and quickly learned what doesn’t work: innovation as an annual ritual (the Innovation Summit), just-in-time innovation (a jam, blitz brainstorming, an innovation offsite), the “innovation room,” and unstructured white space (put up whiteboards and the ideas will come). What usually happens, is the idea with the most theater (extrovert) that wins, and the people with the most charisma suck all of the oxygen (budget) out of the room (which generally has few intorverts in it anyway).

Ultimately, we turned to what we know: games and software. We wanted people to invest their intellectual capital in ways that they felt would benefit the community. That led us right to the stock market as a good game platform for our innovation engine.

In 2005 we launched a collaborative stock market-based game with the aim of making our people feel relevant to the success of the business in the most tangible way, and tapping their amazing intellectual bandwidth far beyond assigned “job tasks.” We wanted to demonstrate that we trust them and entrust them with the future of the company.

We call it Mutual Fun. Here’s how it works:

On your second day at Rite-Solutions, the serious fun begins. You’re invited to join your colleagues in a stock market-based game called “Mutual Fun.”

Imagine a typical stock market portfolio—but instead of buying and selling shares of stock and other financial instruments, players can float, advance and develop portfolios of ideas. Every person in the company gets an initial $10,000 in “opinion” money to invest in their peers’ “idea stocks.”

But the first step is to complete a profile that details your work experience, your expertise and capabilities, your interests and curiosities. This may seem like an obvious step, but it’s a crucial one. This is how players establish what they bring to the game table—and ultimately allows other players to search for people who might be able to assist them in various areas of their innovative ideas based on profile information.

Then the game begins: in addition to investing in and developing other ideas, any player can propose an idea—from a cost saving or efficiency measure (which gets listed on “Savings Bonds”) to an extension of the company’s current capabilities (“Bow Jones”) to a truly disruptive venture into a new business or technology (“SPAZDAQ”).

The creator fleshes out his or her proposal in an “Expect-Us” (rather than a prospectus), assigns it a ticker symbol, and follows a detailed template to describe the value-creating potential of the idea. Ideas are advertised on the Tickler Tape as initiaI piblic offerings (IPOs) with a starting price of $10. Colleagues can make dollar investments in stocks, volunteer time (via “assists”—discrete activities to help move the idea forward), or express interest (in the threaded comments attached to every idea). An algorithm dynamically derives individual stock values (from the collective activity and investment around an idea), portfolio values (from an individual’s activity), and a player’s place on the leader board (from an individual’s own idea stock values and activity in assisting, investing, and discussing their co-workers ideas).

Inevitably, volunteer teams spring up around initiatives on Mutual Fun. We don’t assign anyone to anything. The creator posts “assist” projects and can recruit help, but people end up belonging to initiatives based on their own interests and ability to help (relevance).

You can browse ideas by date created, current value, number of assists, views, comments or just your persoanl portfolio. You can explore a single idea (or a single player profile) in great detail (including its history and recent activity), and you can zoom out to review the best performing ideas and players, the ideas with the most comments or assists, and the velocity of an idea over time.

Another feature, “Penny Stocks,” offers players an opportunity to be heard. Management can pose a question to the player group and the players to provide their 2 cents via a simple template. The “Challenge” template is a way to get a thinking blitz going around a focused topic—and to allow the people doing the thinking to weigh-in on the other inputs provided.

When stocks crack the “Top 20” list of most valuable stocks, we often fund them (with real money!) and volunteers organize to take them to the next level. When any idea turns into a real cost savings or revenue producer, the creators share in a percentage of those gains. (And whenever we file a patent, the individuals behind the ideas are listed as inventors on the patent filing).

Just a couple examples:

One of the first stocks proposed on Mutual Fun (ticker symbol: VIEW) was a proposal to create a 3-D, videogame-like environment for emergency decision making for the company’s Navy and domestic security service clients. That product, called Rite-View, now accounts for 30% of Rite-Solutions’ revenues.

Some of the most valuable ideas come from the most unexpected places. Take the case of Rebecca Hosch, and administrator with no technical experience. In the process of planning the company’s annual holiday party and helping her daughter with a school project, she came up with an idea for using a bingo algorithm we created for our casino clients to create a web-based educational tool. That idea, “Win/Play/Learn” (symbol: WPL), immediately caught the attention of some engineers, who developed her idea into a product ultimately licensed by toy-maker Hasbro. We continue to work with Hasbro on a variety of projects and products well beyond the scope of WPL.

Joe and I would never have come up with either of these ideas—much less funded them—without Mutual Fun. The market not only taps into the quiet genius in the organization—it routes around the management disapproval loop.

So, it’s probably not surprising that Mutual Fun is one of the all-time most popular stocks on the market. We continue to evolve our innovation engine based on the lessons we’ve learned living with it inside Rite-Solutions and building versions of it and embedding them within other relevance-thinking organizations.

Challenges & Solutions

Challenge: The first was honesty. Answer: We admitted defeat immediatly, and relieved ourselves

Solution: Whether you’re the founder or the CEO or a top executive, repeat after me: “I’m not the smartest person.” At most companies, the most brilliant insights can easily come from people other than senior management. We can’t keep up with technology; we’re old! Who can keep up? The answer is: nobody alone can keep up. If you don’t approach the future as a group, you’re not going to get there.

Challenge: Strangers in the crowd

Solution: At Rite-Solutions, we’re small enough that everyone knows everyone. In larger, more dispersed organizations, people don’t know enough about other people to know who could help them shepherd an idea. We keep making our enrollment and profile features more robust. The “Who?” feature embeds the practice of personalization in everything we do as an organization, and improves all of our interactions with people outside the organization.

Challenge: Gaming the game

Solution: In the first version of the idea market, players could view other player’s portfolios and the statistical graphics of the cumulative impressions. This led to new employees simply following the crowd instead of giving their honest assessment. Now, players have no short-cut to portfolio plagiarism.

Challenge: Jumping to judgment too quickly

Solution: If you inject too much management too early, it hinders creativity and can choke intellectual bandwidth. The best advice: watch longer; good ideas get better with air.

Challenge: The innovation engine is not magic. Poor cultures are not great candidate for this type of social product.

Solution: Start changing the culture slowly (maybe birthday parties), admit hat you need help (relieve yourself of being brilliant), and try to think about this important question. How do I make all of my people feel more relevant to the future of the organization?

Benefits & Metrics

BENEFITS: The benefits of the intellectual-community approach are astounding. Not only are ideas freely generated, vetted, supported, and nurtured, but attrition is low and morale is high. Introverts are more likely to stay-engaged and the cumulative graphics of the crowd are quite compelling.

The innovation engine unleashes a continuous engine of new ideas, sparks of energy and connections, wide-angle perspective, and deepening engagement. In addition to new products and new directions, we’re feeding a healthy collaborative culture.

METRICS TO DATE: Rite-Solutions’ innovation games have generated more than 50 innovative product, service and process ideas, 15 of which have been successfully launched and account for 20% of the company’s total revenue. We have filed for 15 patents for innovations produced through the innovation engine. Ideally, we’d like the IP deals related to Mutual Fun to create mini-liquidity events so WE never have to consider selling the company to realize value for our shareholders (the employees).

Lessons

It’s not the leader’s job to think up all the great ideas or to have all the answers

We knew as founders we didn’t have a monopoly on great ideas. Instead, we had this belief that good ideas and useful insights can come from anyone at any time. We were right. In the Web 2.0 world, the leader’s job is to build the mechanism and create the conditions for the quiet genius to emerge and the collective brilliance to be harnessed and harvested.

Don’t expect “just-in-time” innovation

You can’t dictate when and where great ideas and the energy required to bring them to life occurs. Often that’s not in the office during office hours. At Rite-Solutions, we think innovation is a 24-7 activity. We do everything we can to make it part of daily life here. Mutual Fun is accessible (securely) via most web browsers and smart devices.

Don’t confuse extroverts with innovators

Most people make innovation a contact sport, which automatically leaves out the introverts. The smarter your organization is, odds are the more introverts you have in it. In a knowledge economy, harvesting the introverts is the new secret sauce. As an extrovert myself; I never had an idea I didn't like. The higher I was in the old organization, the more dangerious I became.

Mutual Fun gives embryonic ideas—wherever they come from—room to breathe and take shape before “the managerial disapproval loop" shunts the discussion to ground. The best thing for an idea is air, and the more air you give it and the more people that breathe that idea, the better it will become. It can also take the sting out of rejection when it’s the crowd that doesn't see the wisdom of your idea.

Practice “constructive disruption”

The point of Mutual Fun isn’t unstructured free play. If you offer up a truly irrelevant idea, 175 people will not budge it forward. We’re after constructive disruption. We’re not trying to predict the future. We’re trying to provoke it to arrive. Most companies say, “this is what we do.” We say, “what can we do with what we know or what we’ve done before that will be of value?”

This ethos helps to continually open up the field of play at Rite-Solutions to new products, technologies, and directions. The innovation engine is about more than pure idea generation, it’s about decision making. Your portfolio is your belief about where the future is. The game is structured like a one-plate buffet. You really get only what you want when you can’t keep going back. You also realize that you need other people. The whole idea here is that you can’t do it on your own. You don’t have to be the creator of the idea—you just have to be a good citizen of the community.

Make it Fun

The extraordinary level of detail and personality injected into Mutual Fun not only makes it, well, fun, but also makes it intensely engaging and reinforces the idiosyncrasies that bond people together inside an organization. The more detailed the feedback loops, the more rewarding the experience. Mutual Fun metrics keep getting more sophisticated—and offer everybody inside the organization a robust view into their own contribution, the contribution of their peers, and the direction of the company

Share the rewards

Truly promising Mutual Fun ideas become funded (with real money!) and volunteer-staffed projects inside the company. When any idea turns into a real cost savings or revenue producer, the creators share in a percentage of those gains. When we file a patent, the creators of those ideas are listed as inventors on the patent filing.

We share as generously as we can with our people—and we expect them to do the same. We’re trying to turn that old notion—if I share my knowledge, I’m of less value— around. Now, it’s, if I share my knowledge I’m of value.

Foster Relevance

Most people want to contribute meaningfully to the success of their organizations—but to many organizations make it too hard to contribute. This is as true for the Facebook Generation as it is for retirees. Being and staying relevant is the most important intellectual goal of a retiring knowledge worker. I know. I was one. It was no fun feeling like my contributions to something I cared about for so long were no longer necessary. With an innovation engine, your people can “retire” without retiring their relevance to the community. They know a lot and they care a lot. Why would any company want to lose that intellectual bandwidth (or leave any intellectual bandwidth on the table)?

Your quote "There are a lot of families relying on two brains, we are relying on 175 brains & they are ALL engaged!" was the highlight. I am just curious, the common thing between Nucor, Gore Industries, Semco and other great culture based industries is that they are very localized.
Is there any way to have democrative organization as yours at the same time have aggressiveness of expansion like Arcelor Mittal?

Great point about managers not having all the answers. But this takes a special kind of attitude. In my experience, executives advance by developing and promoting their own ideas or solutions, like politicians. They like to score goals, as in sports, and it's hard to stop. I often refer to the metaphor of the organization-as-person, which means that the "head" thinks and the "hands" do. Not easy to shed this way of thinking so it is nice to hear about a business that has done so. Managers often feel they are losing their identity if they have to shift to being catalysts or facilitators. See my article on creating an engaging culture for more on this theme: http://www.lead2xl.com/creating-an-engaging-culture.html

This is quite an inspirational story Jim. I currently work in a large Defence Contractor (UK) and I smiled when I read "an organization that is full of boxes in a big old triangle, every time there’s an opening, there’s a food fight over that box".

I guess my question is, do you believe the model you've achieved in your company could ever be "shoehorned" into a larger organization? Even in some small embryonic way?

Historically, management is expected to have the answers. Going forward (in a knowledge economy), smart managers will learn to harvest the collecive wisdom of others before making an important decision armed only with their own data set. - Jim

A great idea to give an opportunity to everyone to not only voice their ideas but test them via the "internal market" ...

A couple questions on KPIs for employees -
How to measure their idea's internal market performace agaist the time they spent on it? You would expect employees to try to market the idea to gain supporters. Will they be expected to do this outside work hours? Is there a risk of them over-focusing on it, thus letting their 'normal' quality of work suffer?

Thanks for sharing your innovative story. I wished that I had known about this before finalizing my book. "Leadership in a Wiki World: Leveraging Collective Knowledge to Make the Leap to Extraordinary Performance," which will be published next month. I would have loved to have added this wonderful story to the other examples that prove that "nobody is smarter than everybody."

An twist on the suggestion box which people can submit to. Harvard Business School did a number of case studies where they included the exact same idea into it: I'm reminded of my business school days and reading a case called Cooper Industries i believe. Perhaps they also talked about it in a Cisco case i read.
Nevertheless, the story is a fun read.

Neil - Stanford University did a case study on "Unleashing the Quiet Genius in your Organization". I beleive it's available through Harvard Business Review. Innovation with only extroverts is generally more theatre than genius. - Jim

Jim,
This is a really good story of an internal marketplace for ideas, thanks for taking the time to share it.

I had a couple of questions, and one speculation.

First, I'm curious about the connection between an idea's share price (or popularity) and the budgeting investment decisions. Does the share price act as a strong suggestive guide to the folks making strategic decisions on investment? Do they feel bound in any way by what the internal market is telling them, or is this just one piece of insight in a stable of investment decisions?

I'm also curious about how participation in the market affects an employee's standing. Is it generally a key part of an internal review? Has it come to be expected? Would be interested in how it plays on things like performance goals.

Finally, I think it would be tremendously interesting if some civic bureaucracy (say, a city government) would experiment with something like this as part of its budget review. City council meetings, for example, are one way that voters make their preferences known (by showing up in support or opposition to expenditures), but this would be an ongoing and in some ways more engaging way to gauge the worthiness of a municipality's budget categories.

1. Yes. You must let some (not all) internal investment decisions be driven by the tool. If you have asked people to think and then you don't listen to what the "crowd" is saying, then you (management) have failed your organization and they will soon stop thinking/doing, leaving you to do all the thinking/doing yourself.

2. Yes yet again. Though participation is voluntary, I expect all employees to at least have a profile and an investment portfolio. My hope is that by creating an intellectual portfolio, you are provoked to "get engaged" with ideas that you believe have legs. It's that participation that affects their total compensation. As a small private company, I have various tools to reward folks, but REWARD YOU MUST! Otherwise, see answer one....they will soon stop thinking/doing.

As a matter of fact, I am currently chatting with some folks who want to modify the tool for crowd sourcing suggestions from "thinking citicens" to improve the economic state of the state. We may change Rhode Island from the Ocean State, to simply the Underwater State.